Financial Planning Tips
Changes to college financial aid
Do you have a junior in high school? A new change to the FAFSA makes the year they’re looking at be the “prior prior” year
, in other words, 2015! If you are strategizing about financial aid
for students going to college in two years then you want to pay attention to what 2015 looks like.Energy Savings
There’s a really great payback on energy efficiency upgrades. Mass-Save does free energy audits for people. I highly recommend checking these out. [Mass-Save
]. It’s a bit unclear what is going on with the home energy efficiency tax credits
, but if they get extended we may be able to use any home improvements on your taxes.
- Make sure you have a will, health care proxy, and perhaps a durable power of attorney. Check out the new “MOLST” document people are using. [Medical Orders for Life Sustaining Treatment]
- Give out signed HIPAA releases to anyone who you would want to be able to check on you if you were in the hospital, do one for your local hospital and doctor, too. (Sometimes they ask you on admission to do one that you fill out for that specific situation; you might want to replace it after some forethought.) A good tip is to scan it and send it by email to people who ought to have it, they can call the PDF up on their email in an emergency. Here’s a link to one: [Mass Legal Services Website]
- Also consider the NON-legal document you may want most: an “ethical will”. Read more about those here: [Forum for Family and Consumer Issues]
Retirement and Estate Planning
Confirm your beneficiaries are still who you mean them to be on retirement accounts and life insurance. These don’t pass under a will, they pass according to who you named as beneficiary.
Do some estate planning:
- If you think you are going to die with more than a million dollars in MA
- If you have a disabled heir
- If you own real property in more than one state
- If you have a complex life that might need someone to be able to step in and manage it for you or you want to settle your estate privately without public notice: you probably need a revocable trust.
Firearms: Plan what to do with firearms when the permit-holder dies. MA only allows six months after the permit-holder dies to get gun ownership transferred. Help your heirs out by planning this in advance. [Inheriting Guns Guidelines]
Bullion: In the same vein, if you hold bullion make sure your heirs know where it is.
Retirement plans with former employers: If you have retirement plans with old employers meet with a fee-only fiduciary planner (not a broker/representative) to roll them into your own low-fee Traditional IRA.
Changes to social security! If you are thinking of starting Social Security, please take a moment to discuss this with a financial planner (call me!) because we may be able to save you from some very expensive mistakes. There was a HUGE change this November that affects everyone who will be 66 by April 29, 2016 and is married and not dependent on social security income to avoid starving to death. If this describes you, call me!
Emergency Cash, Rainy Day Money, and Catastrophe Money
Have some emergency money in the house, enough to pay for necessary groceries and medication if the banking system went down and you had to pay cash. You can also think of it as “refugee money.” If you needed to evacuate NOW, how much cash would you want for travel costs to far away family? Gas, hotels, meals on the road? Have that much in small bills and rolled coins. (We like rolls of dollar coins for this.)
Rainy Day Money is an escrow account for all the stuff that doesn’t happen regularly, but DOES happen. Car repairs, summer camp, winter heating bills, household appliances. Over a year what would you expect to spend? Put this in your savings account. You will be using something from it each month, but you won’t find yourself being stunned that Christmas came again. A few minutes of thinking about intermittent bills can be a big help to your budget.
Catastrophe Money is six month’s of living expenses. If no catastrophe hits, this becomes retirement money. A Roth IRA is a fantastic place for this, but an HSA may be a good choice if you are eligible for one.
Saving for Your Next Car
Do you have a paid-off car? Start a savings account for its replacement, and fund it each month with the amount you think you would budget for a car payment. Your car just used up one month of its life. If you don’t put money aside for its replacement then you are saying “the future is so bright that it can afford to pay for past consumption – plus interest”. Maybe true if you are twenty-five. Probably not true if you are fifty-five.
it’s a good idea to get a free credit report at least once a year. You can get one each from each of the credit reporting agencies, but since they are largely duplicates of each other I’d say to just get it from one credit agency to start. I’m not talking about the credit score; I’m talking about the report itself. It shows your actual activity, and your goal is to scan it to see if something simply makes no sense. If you forgot you opened up a Home Depot credit card to save $20 that time, that’s fine. But if you discover that someone else is opening up credit cards in your name then it’s time to take action. Start here for the free report: [AnnualCreditReport.com]
Medicare open enrollment is going on now. Make sure elders in your life have prescription drug coverage that suits them. Think of it this way: you get A for free, you buy part B for about $105/month, and you either buy Part D (maybe along with a medigap plan) or you get part C (a medicare advantage plan) that replaces part A, B, D and the medigap plan. You can get excellent help in choosing a medicare plan from the good people in the SHINE program at Franklin County Home Care. For more on the Affordable Care Act, see the health care reform section above.
Other Insurance Needs
Ask for review of your home and car insurancewith your property insurance agent. Homeowner’s insurance, in particular, might need adjustment. Your current agent can do this. Should you havedisability insurance if you are unable to work, term life insurance to ease catastrophes, and long-term care insurance? Your car insurance agent may not be the right person to help with this, you need one qualified in life and annuities. (Let me know if you have one you love!)
Rebalance your portfolio. Sell your winners, buy your losers, reset to your preferred asset allocation strategy.
Free up space by cleaning out things to bring to charity! Keep track of what you donated (I use a clipboard and a tally), get a receipt when you drop it off, then you can load it into a spreadsheet like this one to figure out the value for tax time.
Don’t assume organizations that solicit you are the best at doing their work. Instead, clarify your values and find charities that are doing a great job of what you want done. You may have never heard of them because they have a lousy marketing budget. Two good resources for finding information about charitable organizations areCharity Navigator and GuideStar. We told our children to find charities that reflected their values and we would match their contributions (and grab the tax deductions!) One way to make the world a better place because you are in it is by funding your values.